MBK Partners Clinches Deal For Tesco's Korean Operations -- 2nd Update
September 07 2015 - 2:35AM
Dow Jones News
By Ian Walker and Rick Carew
Tesco PLC confirmed on Monday that it sold its South Korean
operations, known as Homeplus, to a consortium led by Asian
private-equity firm MBK Partners LP for more than $6 billion, which
gives the U.K.-based retailer cash to fund its turnaround
plans.
The sale will jettison a big part of Tesco's global operations,
following an accounting scandal, massive write-downs and upheaval
in its management ranks. Tesco is receiving GBP3.4 billion worth of
net cash proceeds after taxes and transaction fees. Those funds
will redeem Tesco bonds and commercial paper that are maturing in
the next 18 months and other measures including the possible
purchase of some of its existing leasehold stores in the U.K., it
said.
Selling the Homeplus chain gives Chief Executive Dave Lewis more
ammunition to turn around performance at home, where Tesco has lost
ground to German discounters Aldi and Lidl, which are expanding
across the U.K. at a steady clip. Mr. Lewis has cut prices, closed
unprofitable stores, reduced Tesco's product lineup and put more
staff on the shop floor in an effort to stem the slide in market
share.
Tesco said the sale, which is subject to shareholder and
regulatory approvals, would help cut its debt burden. The
transaction will cut its debt by GBP4.2 billion, reducing its debt
load to GBP17.5 billion from GBP21.7 billion, the company said in a
statement.
The deal would be among the largest transactions in Asia this
year and the largest private-equity deal ever in South Korea,
topping Hahn & Co.'s $3.6 billion purchase of control of Halla
Visteon Climate Control Corp. from U.S. auto-parts supplier Visteon
Corp. in December, according to Dealogic data. MBK Partners, which
manages about $8.2 billion in assets, was founded in 2005 by a
group of former Carlyle Group LP executives.
The Homeplus chain operates 1,075 outlet across South Korea and
generated 9.3 trillion Korean won ($7.7 billion) in sales in the
fiscal year through the end of February. The MBK-led consortium
includes co-investors Canada Pension Plan Investment Board and
Singapore state investment firm Temasek Holdings Pte. Ltd.
The Canadian fund, known as CPPIB, said in a separate statement
that it is buying a 21.5% stake in Homeplus for $534 million as
part of the deal.
HSBC Holdings PLC and Barclays PLC advised Tesco on the sale.
The deal is expected to close in the fourth quarter of this
year.
Write to Ian Walker at ian.walker@wsj.com and Rick Carew at
rick.carew@wsj.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires
(END) Dow Jones Newswires
September 07, 2015 03:20 ET (07:20 GMT)
Copyright (c) 2015 Dow Jones & Company, Inc.
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